Jeera prices may decline on stock clearance

October jeera on the National Commodities and Derivatives Exchange (NCDEX) is expected to remain sluggish until expiry of the contract, as change in quality specifications for contracts expiring beyond October would prompt traders to sell the commodity either in futures or in spot markets, traders and analysts said.

"Traders will have to compulsorily clear the existing stocks (of jeera) as quality specifications for November and onwards are different," said Indranil Mukherjee, research analyst, Angel Commodities.

According to NCDEX specifications, jeera for November and onwards will have to be machine-cleaned with foreign matter at 1 per cent and 300 seeds per 1 gm against October contract terms, which allow 2 per cent foreign matter and 350 seeds per 1 gm.

Since the October contract will expire on October 20, the delivery intentions are to be submitted on or before October 14, five working days before expiry.

"The unsold stocks in NCDEX warehouses would be offloaded in the spot market. This would keep the market depressed in the next two to three weeks," an Unjha-based trader said.

Even prices of the November contract on NCDEX are also seen weak as a spillover effect and the downward movement will hasten close to the expiry of the October contract, analysts and traders said.

"The narrowing spread between October and November will also see a decline in prices of November contract," Mukherjee said. The spread between October and November contracts has narrowed to Rs 1,100 today from Rs 1,400-1,450 last week, and likely to shrink further until the expiry of the October contract.

The absence of export demand from West Asia due to Muslim holy month of Ramzan is also adding downward pressure.

However, the scenario is likely to change after Diwali, traders said.

"Export demand, which is slack now, could pick up later as there is a shortage of jeera in the global market," said a Mumbai-based trader.

According to him, spot prices had risen earlier on strong export demand.

A fall in the output of jeera in Turkey and Syria has benefited Indian exports. India's jeera exports in April-June rose 263 per cent to 7,500 tonne from the year-ago period, according to data released by Spices Board.

There is a steady fall in open interest to 13,134 tonne on September 30, from 17,436 tonne a fortnight ago. The prices are also seen declining to Rs 8,245 per 100 kg from Rs 9,000 during the same period.

Also, the stock-level of jeera in NCDEX accredited warehouses also rose to 7,440 tonne on September 30, from 5,783 a week ago, indicating bearish short-term outlook on the contract.